An organisations’ total footprint is often defined by the degree of ownership (see footnote 15) (defined by equity share) and control (defined by operational or financial aspects) of each activity.  

Wholly Owned Assets

On ownership banks are somewhat unique in that in the course of providing some services a bank takes full ownership of an asset.  In this case the bank is fully responsible for the carbon emissions arising from the operations and products and services of this asset.  As such banks should report carbon emissions of all solely owned assets and seek to demonstrate reductions in the associated carbon emissions.

Control

For the most part however banks do not own assets outright, and therefore the bank must focus upon the level of control (as defined by WBCSD/ WRI Greenhouse Gas Protocol) to determine the level of influence it has over the carbon emissions arising as a result of these investments (see figure).

We believe therefore that the true carbon footprint of a bank is dominated by carbon within its loan portfolio and supply chain (although this is assumed as no banks currently report this information), see figure.

We believe it is in the banks, and investors, interest to influence an overall reduction in this carbon, as reduced carbon equates to a reduced risk for the bank (See How to reduce your carbon).

Components of a Bank's True Carbon Footprint

		Bank has a degree of financial or operational control, therefore can influence client carbon emissions e.g. where a bank has majority shareholding, board membership or provides advice.
		Owned – carbon emissions from a bank’s wholly owned assets e.g. an airline.
		Wider influence of a Bank where it does not have full ownership or degree of control, however the bank can influence investment activity through business strategy and the 5 steps to risk management

We believe that the yellow and blue should be measured, and if deemed significant to investors and stakeholders, disclosed.

How to reduce carbon

Factors that banks could be considering when assessing the carbon risk of an activity include:

1. carbon neutrality or zero carbon strategies
2. carbon reduction actions and management plans
3. cost / benefit of alternatives to proposed activities e.g. replacing existing carbon intensive technology with low or zero carbon technology
4. timeframe to achieve alternatives
5. carbon market scenarios / forecasting – how could the price of carbon impact upon the activity, is the project or activity financially viable?

For support and advice on reducing exposure to carbon risk and maximising business opportunities email:info@lowcarbonbanking.co.uk

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15) http://www.ghgprotocol.org/DocRoot/7e9ttsv1gVKekh7BFhqo/ghg-protocol-revised.pdf Pages 16-23